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We Think Some Shareholders May Hesitate To Increase Tootsie Roll Industries, Inc.'s (NYSE:TR) CEO Compensation

Despite positive share price growth of 27% for Tootsie Roll Industries, Inc. (NYSE:TR) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 03 May 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

View our latest analysis for Tootsie Roll Industries

How Does Total Compensation For Ellen Gordon Compare With Other Companies In The Industry?

Our data indicates that Tootsie Roll Industries, Inc. has a market capitalization of US$2.1b, and total annual CEO compensation was reported as US$4.9m for the year to December 2020. That's a notable decrease of 9.4% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$999k.

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For comparison, other companies in the same industry with market capitalizations ranging between US$1.0b and US$3.2b had a median total CEO compensation of US$2.0m. This suggests that Ellen Gordon is paid more than the median for the industry. Moreover, Ellen Gordon also holds US$1.5b worth of Tootsie Roll Industries stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component

2020

2019

Proportion (2020)

Salary

US$999k

US$999k

20%

Other

US$3.9m

US$4.4m

80%

Total Compensation

US$4.9m

US$5.4m

100%

On an industry level, around 30% of total compensation represents salary and 70% is other remuneration. Tootsie Roll Industries pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
ceo-compensation

A Look at Tootsie Roll Industries, Inc.'s Growth Numbers

Tootsie Roll Industries, Inc. has reduced its earnings per share by 8.9% a year over the last three years. In the last year, its revenue is down 11%.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Tootsie Roll Industries, Inc. Been A Good Investment?

With a total shareholder return of 27% over three years, Tootsie Roll Industries, Inc. shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 2 warning signs (and 1 which is a bit concerning) in Tootsie Roll Industries we think you should know about.

Important note: Tootsie Roll Industries is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.